Bears, Sox Could Battle For Bonds

Limited Tax-exempt Funds Okd

October 19, 1987|By John McCarron, Urban affairs writer.

They play different sports, but the Bears and White Sox may soon find themselves in head-to-head competition over the limited amount of tax-exempt bond money available to build their proposed stadiums.

Competition seems inevitable now that a congressional committee has authorized $250 million in tax-exempt bonds to build both facilities.

The House Ways and Means Committee, though, didn`t specify which team should get how much.

The committee action poses a problem because the cost of the new Sox ballpark on the South Side has been estimated at $120 million, the Bears`

proposed West Side stadium at $155 million.

That means one team could come up $25 million short. And the estimate is conservative, bond analysts say, because interest rates-and hence stadium costs-have risen considerably since the projections were made.

``As far as I know it`s first-come, first-served,`` said an aide to U.S. Rep. Dan Rostenkowski (D., Ill.), chairman of the Ways and Means Committee.

Last Thursday, the committee approved the $250 million limit as one of many ``technical corrections`` to the Tax Reform Act of 1986. One of the reforms eliminated tax-exempt status for bonds sold to build sports stadiums. Earlier this year the city and the Sox lobbied to have the proposed new baseball stadium at 35th Street and Shields Avenue ``grandfathered,`` which would mean the prohibition would not apply. And more recently the Bears, with the city`s blessing, asked Rostenkowski to do the same for them.

Rostenkowski came through for both, but he was unwilling to raise the $250 million limit set last year when only the Sox planned a new stadium in the city. Congress still must vote on the measure later this year, and President Reagan must sign it.

The stadiums require different levels of public funding, though both are expected to need tax-exempt bonds.

Tax exempts carry lower interest rates because investors don`t have to pay federal income tax on the interest. That was not so important a year ago when the difference between the interest rates on taxables and tax-exempts narrowed in some cases to less than 1 percent. Lately, though, the gap has widened to 2 percent or more, with indications that it will widen further.

According to Marc Ganis, a Chicago-based sports finance expert, tax-exempts now would save the owner-developer of a stadium about $1.8 million a year in interest payments on a $120 million, 20-year issue.

``A year ago it was desirable to have tax-exempts,`` Ganis said. ``Now it`s the difference between making and breaking a project.``

Though they both are going after non-taxable securities, the Bears and the Sox have different stadium deals.

The Bears and their chosen developer, Metropolitan Structures, propose to own their stadium and to make all interest and principal payments on the construction bonds. They likely will back up that pledge by buying bond insurance or a bank letter of credit.

The city and the state are expected to split the cost of public works and replacement housing near the football arena. That cost has been estimated at nearly $50 million.

The Sox plan is to lease a new ballpark that will be built for them by a city-state stadium authority created last December by the Illinois General Assembly. The authority will charge the team $4 million or more in rent each year, depending on attendance and the leasing of skyboxes. The rent payments, plus $7.5 million a year raised through a new 2 percent tax on city hotel rooms, should just about cover the $12 million annual debt service. If it doesn`t, the city and state would split any of the cost of making up the difference, up to $10 million a year.

If the $250 million bond cap signals a race to the bond market, neither team has been very impressive in getting out of the starting blocks.

The Sox stadium authority was to have opened shop last July. Nothing has been done, though, because Mayor Harold Washington has refused to confirm Gov. James Thompson`s nominee to chair the governing board.

His aides say the mayor doesn`t really object to seating Thomas Reynolds Jr. as chairman. But Washington won`t confirm Reynolds, they say, until Thompson stops pushing another protege, Gary Skoien, for the job of managing director of the McCormick Place convention center.

Some insiders predict that the impasse over Skoien will be broken at the legislature`s fall veto session, which begins this week. Approval of Skoien, they say, may be the governor`s price for helping win more state funds for Chicago schools.

Action on the Bears` stadium, meanwhile, had been delayed while the mayor`s staff wrestled with a strike by teachers and team President Michael McCaskey wrestled with a strike by players.

The West Side site also still faces opposition from some area residents.

About 200 protesters held a rally Sunday afternoon at the proposed stadium site to reiterate their contentions that the area can be redeveloped without the Bears.

The opponents, led by the West Side Coalition for Development, staged a brief march around the Chicago Stadium, 1800 W. Madison St., and included a rally in a parking lot south of the building.

Planning for the Bears` home did take some small steps recently. The mayor appointed a citizens oversight committee; ordered the city`s purchase of tax-delinquent lots near the site, and, with Rostenkowski, advanced the request for tax-exempt bonds.

But physical planning for the Bears stadium has slowed to a crawl while the city waits for the Bears to hire an architectural firm and to cement their development agreement with Metropolitan Structures.

Robert Mier, the mayoral aide in charge of the project, said a complete physical and financial plan must be ready by next spring, when it will be submitted to the legislature.